It is 33% jump over the previous fiscal; frauds at PSU banks risen 287% since 2013-14
When Nirav Modi and his uncle Mehul Choksi siphoned off Rs 13,700 crore through a series of letter of undertaking (LoUs) issued by Punjab National Bank, it made news as one of the biggest frauds of the banking system in the country. But it was not the only one fraud that took place in the last financial year.
According to Reserve Bank of India (RBI) data, there were 5,879 cases of frauds in banks and financial institutions, involving Rs 32,048.65 crore in 2017-18, an increase of 33% over the previous financial year, when the fraud amount aggregated Rs 23,930.17 crore.
A majority of the frauds were committed by the promoters in collusion with bankers.
Trade finance, loans for gems and jewellery, finance for import of equipment, real estate projects are some of the top fraud cases that siphoned out bank finance, sometimes in connivance of bankers or in other cases gullible bankers falling to crooked borrowers.
After Nirav Modi, Winsome Group promoter Jatin Mehta is considered to be one of the largest defaulters in India's history. Mehta, who hails from from the Palanpur region in Gujarat like Nirav Modi, owes more than Rs 6,500 crore to a consortium of banks led by Punjab National Bank, with a loss of more than Rs 1,700 crore. This account was one of the high profile cases that were declared as a fraud in 2016-17.
The public sector banks reported Rs 29,246.55 crore of frauds involving 2,883 cases in 2017-18, a rise of 287.72% from 2013-14. The private sector banks reported a rise of 37% to Rs 2,374.19 in 2017-18 over from 2013-14. For SBI group, the number of frauds grew 46% to Rs 2,541.98 during this period. However, on the other hand, foreign banks saw a 95% drop in frauds to Rs 266.09 as they beefed up the security of their electronic systems and the business degrew in the country.
"There is a suspicion that there is a large number of frauds in the banking system, much larger than the reported numbers. The parliamentary committee on finance headed by Veerapa Moily is going to study on the extend of the frauds in the banking system," said a committee member.
Rei Agro, which defrauded banks of Rs 3600 crore, ABC Cotspin, which siphoned off Rs 850 crore of bank funds, Zoom developers which took Rs 2,600 crore from a clutch banks to import construction equipment are some of the big frauds where the promoters have swindled the banks.
Devidas Tuljapurkar, joint secretary, All India Bank Employees Association, said, "Majority of the bank frauds are in big borrower accounts. Public sector banks have lost Rs 90,032.55 crore in the last five years to frauds. Banks are provisioning money from their profits. Despite the RBI, CBI CVC and the Enforcement Directorate doing all sorts of inspections and audits taking place, frauds are on the rise. This is a loss of the nation, the burden of which falls on the common man. Those responsible for the frauds, including bank employees, should be dealt with strictly."
The consolidated data on bank frauds was submitted to the parliament last week in reply to questions on the rising number of frauds.
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